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Risk management marketing: ‘Is it me against them?’

Mark Ludtke Published on 12 November 2010

Here’s another great, timely question overheard at a Lancaster, Pennsylvania, commodity marketing workshop taught by Stewart-Peterson advisers.

Q. “How can I expect to compete and succeed in marketing today with so many fund managers, speculators and other outside investors entering the commodity markets?”

A. Great question. Agriculture has certainly caught the attention of investors. Look at it this way:

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• Their presence provides liquidity for our markets. That means more flexibility for everyone who participates, because at any given moment there are more buyers and sellers present to engage in transactions.

• Outside investors have completely different goals than you do as a producer. Fund managers and speculators are in it (often in and out quickly) to make a little money on each position they take. Producers, if they are committed to consistent, disciplined marketing, have a much more goal-oriented and long-term approach.

You are engaged in building the best possible weighted average price for your milk over time, while considering your risk tolerance and the financial needs of your operation. So while they are concerned with whether each individual position is right or wrong, you view each position as a part of your overall strategy.

• Don’t be intimidated. Outside investors, regardless of their notoriety or the name on their fund, are working with the same information available to you as a producer. Same charts, same news, same analysis. Granted, investing is what they do every day. They are analyzing, charting, setting triggers and following their own strategy to gain on their investments.

Farm marketers must develop and commit to their own process as well. If you feel overwhelmed by the amount of time or knowledge or experience necessary to perform well, do not be afraid to consult an expert. As is the case with all aspects of your dairy, you maintain your expertise to a certain point, then you call in outside expertise when the situation warrants. Treat marketing the same as other aspects of your operation, and you will be able to perform with the best.” PD

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Mark Ludtke

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